Does a ‘skills gap’ really exist in manufacturing?

Large number of vacant jobs, jobless rates don’t add up

2/16/2014

BY TYREL LINKHORN BLADE BUSINESS WRITER

BLADE ILLUSTRATION/ TOM FISHER

It’s a familiar complaint from manufacturing firms: We can’t find good people to hire.

Even with an outsized pool of unemployed workers, the National Association of Manufacturers has claimed their members have some 600,000 job openings they can’t fill because they can’t find people with the right skills.

Particularly, companies say they struggle to find welders, machinists, and people versed in industrial maintenance.

“We continuously hear from manufacturers that are having difficulty finding qualified applications for their openings,” said Gardner Carrick, a spokesman for the association’s Manufacturing Institute.

Those concerns are repeated by work-force development officials, educators, and some economists. Even President Obama used part of his State of the Union address last month to call on Vice President Joe Biden to improve training programs so more people can get the skills they need for today’s economy.

But some academics have found strong evidence that the skills gap is not nearly as wide as many have claimed — if it exists at all.

In a paper published last summer, researchers from the University of Illinois School of Labor and Employment Relations called the skills gap a “manufactured myth.”

“We looked at a number of different labor market indicators and really found there’s little labor market evidence of this so-called skills gap in Illinois, specifically when you’re talking about manufacturing,” said Alison Quesada, a labor-education specialist at the University of Illinois and the paper’s lead author.

Ms. Quesada said the narrative that a skills gap is one of the reasons for a wobbly job market diverts attention away from other underlying economic issues. And it’s an easy sell to the public.

“It’s a story that resonates with the public because then attention can be focused on the failures of our public education system and the need for continued public support of job-training programs, rather than looking at larger-picture issues of what kind of jobs our economy is creating at the moment,” she said.

No one is arguing that higher education — particularly in high tech fields — doesn’t improve a person’s job prospects. And it is true that manufacturing jobs are more complex.

“A strong back isn’t enough anymore. You need to know something,” said Paul Osterman, a human resources and management professor at MIT Sloan School of Management. But he said the skill level needed is basically a community college education.

They found 75 percent had no significant difficulty finding workers who met their needs.

“As a general proposition, we don’t think there is a skills gap,” he told The Blade.

Furthermore, Mr. Osterman noted that the findings for high-tech manufacturing were no different than the industry as a whole.

“The reason people can’t find work is aggregate demand in the economy is weak. We’re not still in the recession, but there’s a lot of unused capacity, demand is weak, and firms haven’t been hiring,” he said.

So why are openings are going unfilled? Experts say one reason is that some firms advertising jobs are under little pressure to fill them.

And research by economists at the Federal Reserve Bank of Chicago has suggested many employers aren’t looking all that hard.

“Their finding suggests there’s a decline in the intensity with which firms fill their vacancies,” said Murat Tasci, a research economist with the Federal Reserve Bank of Cleveland.

Online job boards make it easy and inexpensive to post openings, so much so that Mr. Tasci said some employers will advertise jobs they don’t intend to fill unless they are blown away by an applicant.

Mike Veh, work-force development manager at The Source of Northwest Ohio, hasn’t seen local companies doing that, but he agrees that firms can afford to be picky.

“It’s an employers’ market. There’s a lot more people out there looking for work than there are jobs,” he said. “Employers may have a tendency to be a little more particular about who they are, looking for that ace or that diamond in the rough.”

Mr. Veh said a skills gap exists but more in what he calls “soft skills.” Some job seekers are not well-prepared for interviews, don’t present themselves well, are inflexible, or lack a team attitude.

Employers also have noticed those problems.

Other factors

Toledo Molding and Die is a growing automotive-parts supplier based in Toledo. President Steve Ciucci said one of the reasons the company is doing well is because of its good work force.

He said finding new employees isn’t always easy. But it’s not because people aren’t able to do the work.

“I don’t know if the proper word is skills gap,” Mr. Ciucci said. “A high school diploma for our hourly folks is more than sufficient. It’s do they really want to work, are they prepared to work full time, are they prepared to work 50 to 60 hours a week, can they handle the physical requirements of the manufacturing job?”

Some people just aren’t cut out to be on their feet all day long in a hot plant, he said. Others aren’t punctual or willing to put in the effort.

The people the company hires have a chance to move up to more skilled positions, Mr. Ciucci said.

The company has had more difficulties in finding engineers, computer-aided designers, and the like. Mr. Ciucci said it’s always been a tough undertaking to find the right people with the right level of experience for Toledo Molding and Die’s specific industry, but it’s become harder in the last couple years.

“Those folks are difficult to find in northwest Ohio and southeast Michigan with the experience we’re looking for,” he said.

Rather than go out looking for people with the skill set it needs, Grob Systems in Bluffton, Ohio, makes an effort to train people.

The German-owned company builds equipment systems for the automotive industry using extremely tight tolerances. That means they need employees with strong math skills, said Darrin Lanasky, the company’s mechanical assembly manager.

Grob has had an apprenticeship program for years. Apprentices used to work toward a journeyman tool-and-die card, but Grob recently switched to offering an associate’s degree through Rhodes State College in Lima, Ohio, to draw more interest.

Officials also have started going to high school career fairs, but Mr. Lanasky said the company is still having trouble attracting young people.

“We’re not the only ones who are panicking because we can’t find enough people with the skills,” he said. “Honda, they’re going to high school career fairs too. I see all these companies at the same career fairs.”

Multiplier effect

George Mokrzan, chief economist for Huntington National Bank, said a recent survey of executives found that IT workers are in short supply. He also noted that jobs that require significant education and training, such as engineers, are in high demand.

If companies are having difficulties filling jobs in IT or logistics, Mr. Mokrzan said, that could have a multiplier effect on the economy.

“It’s always a company-by-company question,” Mr. Mokrzan said about the question of a skills gap. “I think overall in the economy there are growing signs companies are having trouble finding workers, finding people with skills.”

The trucking industry in particular has voiced concerns that they can’t find drivers.

But those who have studied the issue say employers and industries are quick to say there’s a skills gap even when the evidence is to the contrary.

Mr. Osterman said he believes that had his study not relied on a series of specific questions and simply asked “do you have trouble finding skilled employees” the results might have been flipped.

“It’s an easy thing to say. It’s cheap talk,” he said.

That’s not to discount that there are companies that truly struggle to find people. And for those firms, it is a real problem.

But Mr. Osterman said the research shows that a skills gap is not widespread for the manufacturing economy as a whole.

“If there was a skills gap, there would definitely be a significant increase in wages. That’s supply and demand in the labor market,” Mr. Osterman said.

According to data from the Bureau of Labor Statistics, average hourly wages for workers in the manufacturing sector increased 7 percent from the end of the recession to January.

The average hourly wage for all sectors of the private U.S. economy rose 9 percent in that same time period.

“You tend to hear these arguments that I can’t find workers,” Mr. Tasci said. “It’s always a function of what wages you’re offering. You might not be able to find a worker at a certain wage, but I’m sure if the objective is to find someone, you can find someone at a different wage rate.”

Mr. Carrick, at the Washington-based Manufacturing Institute, said it isn’t that simple.

That argument, Mr. Carrick said, assumes that people with the skills to do these jobs choose not to because they can make more elsewhere.

“That isn’t the case,” Mr. Carrick said. “Even if the pay were increased it would take some time to fill the pipeline and for those signals to reach people who are making career decisions.”

And because returning manufacturing to the United States has in many cases only recently become economically feasible, Mr. Carrick said companies can’t just significantly boost wages.